Blame Jimmy Carter for all the airline bankruptcies. Or better yet, thank him.

American Airlines’ parent company, AMR Corporation, filed for Chapter 11 bankruptcy protection on Tuesday, surprising exactly no one. A major corporate bankruptcy is normally a bit of a shock, but there’s nothing shocking about bankruptcy in the American passenger air business, where filings are way more common than crashes. Frontier Airlines filed in 2008, Delta and Northwest both filed in 2005 (and later merged), and United and U.S. Airways filed in 2002 and then again in 2004. TWA went down in 2001 as part of an acquisition by the now-bankrupt American Airlines. Pan Am, of course, went out of business entirely 10 years before that, only to re-emerge as a short-lived television show about the glories of air travel in the era before constant bankruptcy. And those are only the big ones. All told there have been 189 airline bankruptcy filings in America since 1990. Why?

You can blame Jimmy Carter for the bankruptcies. Or perhaps you ought to thank him.

Airline bankruptcies are a bit unusual in that they’re aimed more at labor unions than at creditors. American Airlines is certainly burdened by debts, but it’s been a bad credit risk for long enough that most of its debt is “secured”—backed by physical assets like airplanes that can be repossessed if it tries to default. So there are some unsecured creditors who’ll lose out, but the real aim of the filing, in the words of S&P 500 analyst Philip Baggaley is to “emerge as a somewhat smaller airline with more competitive labor costs.”

American’s labor costs are uncompetitive because it didn’t go bankrupt a decade ago when everyone else was doing it. Instead the airline and its unions reached an agreement on moderate concessions that allowed it to avoid bankruptcy. That was a point of pride for years but laid the groundwork for the airline’s current problems. Having made pre-emptive concessions in the past that saved the company, American’s unions were understandably reluctant to agree to further givebacks even though American’s cost structure remained higher than its competitors. Bankruptcy gives the company new legal options to put the squeeze on its workforce.

The bankruptcies and the labor conflicts arise in the airline industry because it is not a good business. Cumulative earnings across the history of American passenger aviation are negative $33 billion.

To understand the economic problems in the industry, you have to go back to the long-defunct Civil Aeronautics Board, the federal agency that used to regulate aviation. Passenger aviation clearly needs some regulation for the sake of passenger safety, pollution control, and the community impacts of airports. But in the early decades of the industry, CAB went far beyond that to regulate what fares airlines were allowed to offer and which routes they were allowed to fly. This became a classic case of regulatory capture. Airlines cared a lot about the actions of CAB while ordinary voters had bigger fish to fry. As a consequence, the board ended up creating a cozy cartel where airlines didn’t compete much and certainly didn’t compete on price. With price competition off the table, airlines invested lavishly in offering a high level of service. Labor unions got in on the act, using their clout to force managers and owners to share with workers some of the excess profits generated by CAB.

And then along came Jimmy Carter.

In 1977, Carter appointed Cornell University economist Alfred Kahn to run CAB, one front in an underrated multipronged Carter-era assault on cartelization that included the legalization of home-brew beer as well as more consequential deregulation of the interstate trucking and natural gas industries. Kahn was an aviation outsider, an expert in overregulation rather than the details of air travel. His mandate was to get the federal government out of the business of setting airfares. A year earlier, Sen. Ted Kennedy, with future Supreme Court Justice Stephen Breyer as his lead adviser, had begun to lay the groundwork for the change with a series of legislative hearings on the high cost of air travel. One point of note was that federal regulation applied only to interstate travel. Flights inside a single state—common in Texas and California—were unregulated and much cheaper. A flight from Los Angeles to San Francisco, for example, cost about half a flight from Boston to Texas. With the CAB headed by a man who wanted to shut the agency down, Kennedy delivered legislation to do just that. Carter signed the Airline Deregulation Act into law in 1978 and the federal regulatory apparatus wound down over the next six years.

Looking back on the legacy of deregulation in January of this year, Breyer observed that “airline revenue per passenger mile has declined from an inflation-adjusted 33.3 cents in 1974, to 13 cents in the first half of 2010.” This steep reduction in fares has been a triumph for passengers, especially tourists and families. A cross-country flight to join in a family holiday celebration is now easily within the middle class’s grasp. The story of airline deregulation is, in many ways, a cheering antidote to ideological bickering and cynicism about the political process.

But the lower fares do come at a cost: lower wages and worse working conditions for employees. Breyer says now that “no one foresaw” how much deregulation “might unfairly harm workers in the industry.” But it’s difficult to see what was so unforeseeable about it. Back in the old cartel days, labor and management were fighting over how to divide the extraordinary economic surplus granted them by regulators. Introducing competition lowered fares and eliminated the surplus, forcing the rounds of givebacks, bankruptcies, mergers, and liquidations the industry has been experiencing for decades. American’s bankruptcy has sparked immediate speculation about a possible merger with U.S. Airways.

Jimmy Carter was the worst president in U.S. history, he will perhaps be beaten by Barak Obama.

Completely irrelevant for this thread.

_________________"Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence." - John Adams

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December 2nd, 2011, 10:21 pm

Blueskies

QB Coach

Joined: September 13th, 2007, 12:43 pmPosts: 3084

Re: Blame Jimmy Carter for all the airline bankruptcies

True, and there were many worse presidents. GWB, Herbt Hoover, FDR (depending on your political ideology), Wilson, Buchanan just to name a few.

The problems the country had under Jimmy Carter, weren't even his fault. He was surely incompetent in solving them, but they originated in the horrendous spending polices of LBJ and the horrendous monetary policy of Richard Nixon.

I don't know why anyone would ever invest in the airlines. Very low profit industry.

December 3rd, 2011, 3:33 pm

Stallion

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Re: Blame Jimmy Carter for all the airline bankruptcies

Blueskies wrote:

True, and there were many worse presidents...FDR (depending on your political ideology)

Those who rank FDR that low are almost certainly not historians. The The Murray-Blessing 1982 survey asked historians to state if they were liberal or conservative on a variety of issues and then rank American Presidents. Liberals ranked FDR as #2 and conservatives rank him as #3. Also, Jimmy Carter had six presidents ranked below him.

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December 30th, 2011, 1:34 am

regularjoe12

Off. Coordinator – Joe Lombardi

Joined: March 30th, 2006, 12:48 amPosts: 4180Location: Davison Mi

Re: Blame Jimmy Carter for all the airline bankruptcies

Touchdown Jesus wrote:

wjb21ndtown wrote:

Jimmy Carter was the worst president in U.S. history, he will perhaps be beaten by Barak Obama.

Completely irrelevant for this thread.

common now...why leave "W" out of the debate

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December 30th, 2011, 11:13 am

Blueskies

QB Coach

Joined: September 13th, 2007, 12:43 pmPosts: 3084

Re: Blame Jimmy Carter for all the airline bankruptcies

Quote:

Those who rank FDR that low are almost certainly not historians. The The Murray-Blessing 1982 survey asked historians to state if they were liberal or conservative on a variety of issues and then rank American Presidents. Liberals ranked FDR as #2 and conservatives rank him as #3. Also, Jimmy Carter had six presidents ranked below him.

Who cares about what people considered "historians" think of FDR? They've spent their entire professional career reading and writing for other "historians"--a big philosophical circle-jerk.

FDR was basically a dictator (how many other presidents were elected 4 times?). He forced the US into a war it didn't need to fight; he created a bunch of unsustainable social programs. Thus my hatred.

He also committed the biggest theft in American history in his 1932 gold seizer.

December 30th, 2011, 8:50 pm

regularjoe12

Off. Coordinator – Joe Lombardi

Joined: March 30th, 2006, 12:48 amPosts: 4180Location: Davison Mi

Re: Blame Jimmy Carter for all the airline bankruptcies

Quote:

He forced the US into a war it didn't need to fight; he created a bunch of unsustainable social programs. Thus my hatred.

um...what???? im a bit of a WWII buff and that statment is blatantly NOT true...

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January 5th, 2012, 1:55 pm

Stallion

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Joined: October 15th, 2005, 12:45 pmPosts: 1834

Re: Blame Jimmy Carter for all the airline bankruptcies

Quote:

Who cares about what people considered "historians" think of FDR? They've spent their entire professional career reading and writing for other "historians"--a big philosophical circle-jerk.

Those people considered historians are generally people with PhDs in history. They do spend most their career reading and writing about these people and should be trusted with such things.

Quote:

FDR was basically a dictator (how many other presidents were elected 4 times?).

Yes, being elected in the world oldest democracy = dictator.

Quote:

He forced the US into a war it didn't need to fight

If by forced you used economic leverage against Japan thus forcing them to attack then yes. This does not mitigate the truth that it was a war that the United States had to fight. Americas lopsided neutrality alone was enough to drag them into the war sooner or later. More importantly defeating the United States was an essentially part of the blueprints built by both Hitler and the Kwantung Army. War would have come eventually and thankfully we did it while there was still countries we could Allie ourselves with.

Quote:

He also committed the biggest theft in American history in his 1932 gold seizer.

I do not know much about this. Do you have historic references to back this up?

_________________2011 Adopted Lion: Rob Sims/Looking for a side job at I.H.O.P because he can't stop making pancakes.

January 5th, 2012, 6:37 pm

Blueskies

QB Coach

Joined: September 13th, 2007, 12:43 pmPosts: 3084

Re: Blame Jimmy Carter for all the airline bankruptcies

Quote:

Those people considered historians are generally people with PhDs in history. They do spend most their career reading and writing about these people and should be trusted with such things.

Why? The interpretation of history is an imprecise social science. In the end, it is all conjecture and opinion.

I'm extremely well read and probably as smart as most of these historians. My interpretation of history is not as equally as valid as theirs? Because I didn't read and write what a bunch of other "historians" wanted me to for 6 years?

Being a historian or being a sociologist or any other social scientist is not like being surgeon or a dentist or a computer programmer. There are no technical skills and no absolutes. If your opinion on history is "wrong" you won't cause a car to break down or a person to die on the operating table or a computer to get the blue screen of death.

Quote:

Yes, being elected in the world oldest democracy = dictator.

He was basically the US version of Hugo Chavez. There is a reason we immediately passed an amendment legally baring presidents from seeking more than 2 terms after he died.

Did you know the focus of the Republican's presidential platform in 1936 was restoring the independence of the courts? Kind of ironic isn't it? There was also a well-organized plot to overthrow FDR--something no other president in the history of the US has had against him, except of course Lincoln, but that plot was a war. Why do you think people were trying to overthrow him?

FDR had so poop on the legal structure of the US that the sole focus of the Republican party in 1936 was restoring the rule of law. Of course, people were stuck in bread lines and just wanted more free poop, they didn't care.

Quote:

This does not mitigate the truth that it was a war that the United States had to fight. Americas lopsided neutrality alone was enough to drag them into the war sooner or later. More importantly defeating the United States was an essentially part of the blueprints built by both Hitler and the Kwantung Army. War would have come eventually and thankfully we did it while there was still countries we could Allie ourselves with.

Again, arguing a counterfactual here. IMO, there is ample evidence to suggest that the US would not have had to fight Nazi Germany. The Soviet Union was wearing them down and Hitler was becoming increasingly unstable as the war went on. There were numerous plots against his life by his own generals. Eventually, one of them would have succeeded. Further, there is no evidence Hitler ever planned to attack the US. Many of your beloved historians agree with me on this.

Fighting Imperial Japan? Yeah, that was probably inevitable--but only because we were playing the same game. That is, we wanted to dominate the Pacific and have colonies and so did they. Our war with Japan was two thieves slugging it out for piece of the stolen loot. Not us fighting some evil force.

Quote:

I do not know much about this. Do you have historic references to back this up?

In 1932, FDR made the possession of gold by American citizens (except for jewelry) illegal. He made them hand over all their gold coins, paying them about $20 per ounce. He then revalued the dollar up to $35 an ounce--effectively stealing half of their wealth outright.

And, of course, in true dictatorial fashion, he did this by executive order--didn't even get congressional approval.

I believe many people are not as knowledgeable in the history of the great depression as they believe. It was truly a fascinating time.

January 6th, 2012, 12:37 am

Stallion

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Joined: October 15th, 2005, 12:45 pmPosts: 1834

Re: Blame Jimmy Carter for all the airline bankruptcies

Quote:

He was basically the US version of Hugo Chavez. There is a reason we immediately passed an amendment legally baring presidents from seeking more than 2 terms after he died.

There is a reason. That reason is that politicians realized that it could be a threat in the future not that FDR was a dictator. FDR was reelected because he was a good president and Truman got reelected after him for following FDRs political path.

Quote:

Did you know the focus of the Republican's presidential platform in 1936 was restoring the independence of the courts? Kind of ironic isn't it?

Ironic? This was simply politics as the Republicans tried to play up FDRs court packing scheme (which was admittedly shady)

Quote:

There was also a well-organized plot to overthrow FDR--something no other president in the history of the US has had against him, except of course Lincoln, but that plot was a war. Why do you think people were trying to overthrow him?

First, it seems there is not concrete proof that this plot existed. Second, if it did exist it would seem that it was not well organized. Third, it was happening during 1933 which was FDR's first year in office and had not done much. It was instead a bunch of rich men afraid of his campaign promises. Therefore it is not indicative of his presidency.

Quote:

Again, arguing a counterfactual here. IMO, there is ample evidence to suggest that the US would not have had to fight Nazi Germany. The Soviet Union was wearing them down and Hitler was becoming increasingly unstable as the war went on. There were numerous plots against his life by his own generals. Eventually, one of them would have succeeded. Further, there is no evidence Hitler ever planned to attack the US. Many of your beloved historians agree with me on this.

First, Hitler outlines his thoughts on war with the United States as early as 1928. Second, Germany declared war on the United States (the only country he did declare war on) in support of Japan and at the urging of his staff as they believed that they could not bring the United Kingdom down as long as "neutral shipping" continued to come from America. It should also be noted that in 1941 it was not evident that the Soviet Union would stem the Nazi onslaught. The only way that the United States could have stayed out of the war was to be truly neutral and supported neither side. This could have realistically allowed for Axis victory.

In 1932, FDR made the possession of gold by American citizens (except for jewelry) illegal. He made them hand over all their gold coins, paying them about $20 per ounce. He then revalued the dollar up to $35 an ounce--effectively stealing half of their wealth outright.

And, of course, in true dictatorial fashion, he did this by executive order--didn't even get congressional approval.

I believe many people are not as knowledgeable in the history of the great depression as they believe. It was truly a fascinating time.

I will have to do more research on this topic in the future and will therefore not comment other than saying that it was the greatest theft in United States history is a complete exaggeration.

_________________2011 Adopted Lion: Rob Sims/Looking for a side job at I.H.O.P because he can't stop making pancakes.

January 6th, 2012, 2:48 am

regularjoe12

Off. Coordinator – Joe Lombardi

Joined: March 30th, 2006, 12:48 amPosts: 4180Location: Davison Mi

Re: Blame Jimmy Carter for all the airline bankruptcies

Quote:

Quote:Again, arguing a counterfactual here. IMO, there is ample evidence to suggest that the US would not have had to fight Nazi Germany. The Soviet Union was wearing them down and Hitler was becoming increasingly unstable as the war went on. There were numerous plots against his life by his own generals. Eventually, one of them would have succeeded. Further, there is no evidence Hitler ever planned to attack the US. Many of your beloved historians agree with me on this.

First, Hitler outlines his thoughts on war with the United States as early as 1928. Second, Germany declared war on the United States (the only country he did declare war on) in support of Japan and at the urging of his staff as they believed that they could not bring the United Kingdom down as long as "neutral shipping" continued to come from America. It should also be noted that in 1941 it was not evident that the Soviet Union would stem the Nazi onslaught. The only way that the United States could have stayed out of the war was to be truly neutral and supported neither side. This could have realistically allowed for Axis victory.

America got involved with Germany in WWII due to the fact that Hilter had his Wolf Packs attacking american trade ships. We didn't even get involved after the first sinking...or the second...or the third. I guess we should have just let em keep sinking our trade ships then right? Protecting American lives isn't worth fighting a war over right? sigh.